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(1985). FIRESTONE TIRE & RUBBER COMPANY v. BRUCH Decided February 21, 1989. 29942 (1974) (remarks of Sen. Javits)). Respondents, six Firestone employees who were rehired by Occidental, sought severance benefits from Firestone under the termination pay plan. 91 Please try again. Consistent with established principles of trust law, we hold that a denial of benefits challenged under 1132(a)(1)(B) is to be reviewed under a de novo standard unless the benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan. See, e.g., Jung v. FMC Corp., 755 F.2d 708, 711-712 (CA9 1985) (where "the employer's denial of benefits to a class avoids a very considerable outlay [by the employer], the reviewing court should consider that fact in applying the arbitrary and capricious standard of review," and "[l]ess deference should be given to the trustee's decision"). The administrator may make a reasonable charge to cover the cost of furnishing such complete copies. * The Court of Appeals held that, where an employer is itself the fiduciary and administrator of an unfunded benefit plan, its decision to deny benefits should be subject to de novo judicial review. [489 Thus, the raison d'etre for the LMRA arbitrary and capricious standard -- the need for a jurisdictional basis in suits against trustees -- is not present in ERISA. 4, 11 N. E. 2d 878 (1937). U.S. 101, 108] "The extent of the duties and powers of a trustee is determined by the rules of law that are applicable to the situation, and not the rules that the trustee or his attorney believes to be applicable, and by the terms of the trust as the court may interpret them, and not as they may be interpreted by the trustee himself or by his attorney. Nichols v. Eaton, See also Comment, The Arbitrary and Capricious Standard Under ERISA: Its Origins and Application, 23 Duquesne L. Rev. To fill this gap, federal courts have adopted the arbitrary and capricious standard developed under 61 Stat. There is an obvious parallelism here: one "may become" eligible by acquiring, in the future, the same characteristic of eligibility that someone who "is" eligible now possesses. This case presents two questions concerning the Employee Retirement Income Security Act of 1974 (ERISA), 88 Stat. The Court of Appeals did not attempt to determine whether respondents were "participants" under § 1002(7). 3 W. Fratcher, Scott on Trusts 201, at 221 (emphasis added). 460 CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT Syllabus § 1132(c)(1)(B) (1982 ed., Supp. by Phillip E. Stano, Jack H. Blaine, and David J. Larkin, Jr.; for the Chamber of Commerce of the United States et al. § 186(c), a provision of the Labor Management Relations Act, 1947 (LMRA). Because the District Court had applied different legal standards in granting summary judgment in favor of Firestone on Counts I and VII, the Court of Appeals remanded the case for further proceedings consistent with its opinion. 1969); Atlantic Steel Co. v. Kitchens, 228 Ga. 708, 187 S. E. 2d 824 (1972); Sigman v. Rudolph Wurlitzer Co., 57 Ohio App. 1988). "This view attributes conventional meanings to the statutory language since all employees in covered employment and former employees with a colorable claim to vested benefits `may become eligible.' ERISA defines a fiduciary as one who, "exercises any discretionary authority or discretionary control respecting management of [a] plan or exercises any authority or control respecting management or disposition of its assets.". View Case; Cited Cases; Citing Case ; Cited Cases . Firestone concluded that respondents were not entitled to the information because they were no longer "participants" in the plans. It tried to solve this dilemma by suggesting that courts use discretion and not award damages if the employee's claim for benefits was not colorable or if the employer did not act in bad faith. Justice O’Connor, For the Court. RSS Subscribe: 20 results | 100 results. 29 U.S.C. Cf. Argued November 30, 1988. All three of the plans were either "employee welfare benefit plans" or "employee pension benefit plans" governed (albeit in different ways) by ERISA. ET AL. 1002(16)(A)(ii), and fiduciary, 1002(21)(A), of each of these "unfunded" plans. Indeed, respondents admitted at oral argument that "the words point against [them]." With respect to Count I, the District Court held that Firestone had satisfied its fiduciary duty under ERISA because its decision not to pay severance benefits to respondents under the termination, pay plan was not arbitrary or capricious. . § 1002(8). -725 (1875) (emphasis added). See Note, Judicial Review of Fiduciary Claim Denials Under ERISA: An Alternative to the Arbitrary and Capricious Test, 71 Cornell L. Rev. Id. Given this language and history, we have held that courts are to develop a "federal common law of rights and obligations under ERISA-regulated plans." 473 193-208 (2d rev. U.S. 359, 361 (A) for the relief provided for in [§ 1132(c)], [and] (B) to recover benefits due to him under the terms of his plan.". of Oral Arg. before the Subcommittee on Labor-Management Relations of the House Committee on Education and Labor, 97th Cong., 2d Sess., 60 (1983). 489 U. S. 110-115. It noted, however, that the arbitrary and capricious standard had been softened in cases where fiduciaries and administrators had some bias or adverse interest. In Firestone Tire, the Court reasoned that the default standard of review for ERISA benefits cases should be de novo; but, because plan administrators Congress did not say that all "claimants" could receive information about benefit plans. ERISA's disclosure provisions. 489 U. S. 108-110. by looking to the terms of the plan and other manifestations of the parties' intent. To say that a "participant" is any person who claims to be one begs the question of who is a "participant" and renders the definition set forth in § 1002(7) superfluous. Rec. See, e. g., Struble v. New Jersey Brewery Employees' Welfare Trust Fund, 732 F.2d 325, 333 (CA3 1984); Bayles v. Central States, Southeast and Southwest Areas Pension Fund, 602 F.2d 97, 99-100, and n. 3 (CA5 1979). That provision allows a suit to recover benefits due under the plan, to enforce rights under the terms of the plan, and to obtain a declaratory judgment of future entitlement to benefits under the provisions of the plan contract. U.S. 101, 120] Nachman Corp. v. Pension Benefit Guaranty Corp. (b) Principles of the law of trusts -- which must guide the present determination under ERISA's language and legislative history and this Court's decisions interpreting the statute -- establish that a denial of benefits challenged under § 1132(a)(1)(B) must be reviewed under a de novo standard unless the benefit plan expressly gives the plan administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the plan's terms, in which cases a deferential standard of review is appropriate. before the Subcommittee on Labor-Management Relations of the House Committee on Education and Labor, 97th Cong., 2d Sess., 60 (1983). 4, 11 N.E.2d 878 (1937). Id., at 105; see also id., at 108. Co. v. Russell, The Secretary [of Labor] may by regulation prescribe the maximum amount which will constitute a reasonable charge under the preceding sentence. § 1001 et seq. [ 519 (ED Pa. 1986). 1132(a), 1132(f). By operation of law, Firestone itself was the administrator, 29 U.S.C. The dispute in this case therefore centers on the definition of the term "participant," which is found in § 1002(7): "The term 'participant' means any employee or former employee of an employer, or any member or former member of an employee organization, who is or may become eligible to receive a benefit of any type from an employee benefit plan which covers employees of such employer or members of such organization, or whose beneficiaries may be eligible to receive any such benefit. be subject to judicial review, the assumption seems to be that a de novo standard would encourage more litigation by employees, participants, and beneficiaries who wish to assert their right to benefits. 1101-1114, "codif[y] and mak[e] applicable to [ERISA] fiduciaries certain principles developed in the evolution of the law of trusts." See generally Pilot Life Ins.   See Van Boxel v. Journal Co. Employees' Pension Trust, 836 F.2d 1048, 1052 (CA7 1987) ("[W]hen a plan provision as interpreted had the effect of denying an application for benefits unreasonably, or as it came to be said, arbitrarily and capriciously, courts would hold that the plan as structured' was not for the sole and exclusive benefit of the employees, so that the denial. Justia Annotations is a forum for attorneys to summarize, comment on, and analyze case law published on our site. The relevant portion of the definition, however, refers to an employee "who is or may become eligible to receive a benefit." 828 F.2d at 152. costs of producing the information under § 1024(b)(4) and Department of Labor regulations. § 1001 (setting forth congressional findings and declarations of policy regarding ERISA). In our view, the term "participant" is naturally read to mean either "employees in, or reasonably expected to be in, currently covered employment," Saladino v. I.L.G.W.U. Complaint §§ 87-94, App. (1960). Those reasons have nothing to do with the concern for impartiality that guided the Court of Appeals, and the de novo standard applies regardless of whether the plan at issue is funded or unfunded and whether the administrator or fiduciary is operating under a conflict of interest. Firestone Tire & Rubber Co. v. Bruch, 489 U.S.110, 115, the Court reasoned that the employer and ERISA administrator could agree on a more deferential standard of review. [489 Lower court United States Court of Appeals for the Third Circuit . See H. R. 6226, 97th Cong., 2d Sess. 986, 994, n. 40 (1986). Respondents, six Firestone employees who were rehired by Occidental, sought severance benefits from Firestone under the termination pay plan. Plan Sponsor Interpretation Must Be Given Deference in Lawsuits Challenging Plan Terms. by a participant or beneficiary [of a covered plan] . . 829, as amended, 29 U.S.C. Dayco later sued both Firestone and Goodyear, alleging that the two companies conspired to monopolize the tire industry in the United States. It reasoned that in such situations deference is unwarranted given the lack of assurance of impartiality on That provision allows a suit to recover benefits due under the plan, to enforce rights under the terms of the plan, and to obtain a declaratory judgment of future entitlement to benefits under the provisions of the plan contract. at 521-526. The 6th Circuit noted that Firestone Tire & Rubber Co. v. Bruch, in which an arbitrary-and-capricious standard of review is required by the court if the plan “gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan,” should … Learn more about FindLaw’s newsletters, including our terms of use and privacy policy. Consistent with established principles of trust law, we hold that a denial of benefits challenged under § 1132(a)(1)(B) is to be reviewed under a de novo standard unless the benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan. Bowsher v. Merck & Co., The Court of Appeals held that where an employer is itself the fiduciary and administrator of an unfunded benefit plan, its decision to deny benefits should be subject to de novo judicial review. BECKER, Circuit Judge. Instead, in a Supreme Court decision from 1989, Firestone Tire & Rubber Co. v. Bruch, 489 U.S.110, 115, the Court reasoned that the employer and ERISA administrator could agree on a more deferential standard of review. The Court of Appeals reversed and remanded, holding that benefits denials should be subject to de novo judicial review, rather than review under the arbitrary and capricious standard, where the employer is itself the administrator and fiduciary of an unfunded plan, since deference is unwarranted in that situation, given the lack of assurance of impartiality on the employer's part. 24-25; Reply Brief for Petitioners 7, n. 2; Brief for United States as Amicus Curiae 14-15, n. 11. Those questions are best left to the Court of Appeals on remand. National Retirement Fund, 754 F.2d 473, 476 (CA2 1985), or former employees who "have . Rather, one is a fiduciary to the extent he exercises any discretionary authority or control. Second, we determine which persons are "participants" entitled to obtain information about benefit plans covered by ERISA. IV), which provides that, "[a]ny administrator . The Federal District Court granted summary judgment for Firestone, holding that the company had satisfied its fiduciary duty as to the benefits requests because its decision not to pay was not arbitrary or capricious, and that it had no disclosure obligation to respondents because they were not plan "participants" within the meaning of 1002(7) at the time they requested the information. IV). SCALIA, J., filed an opinion concurring in part and concurring in the judgment, post, p. 489 U. S. 119. As this case aptly demonstrates, the validity of a claim to benefits under an ERISA plan is likely to turn on the interpretation of terms in the plan at issue. Respondents unsuccessfully sought plan information from Firestone pursuant to 29 U.S.C. 1132(c) (1)(B) (1982 ed., Supp. At the time of the sale, Firestone maintained three pension and welfare benefit plans for its employees: a termination pay plan, a retirement plan, and a stock purchase plan. 104-106. Id., at 521-526. who is or may become eligible to receive a benefit of any type from an employee benefit plan. Ante at 489 U. S. 117. ... 706 F.2d 1289 - UNITED STEELWORKERS OF AM. "[T]he views of a subsequent Congress form a hazardous basis for inferring the intent of an earlier one." of Oral Arg. In relevant part, that plan provides as follows: Respondents then filed a class action on behalf of "former, salaried, non-union employees who worked in the five plants that comprised the Plastics Division of Firestone." ", 3 W. Fratcher, Scott on Trusts § 201, at 221 (emphasis added). . § 1024(b)(4) without paying the $100-a-day damages assessable for breach of that obligation, 29 U.S.C. The LMRA does not provide for judicial review of the decisions of LMRA trustees. The Court of Appeals also held that the right to disclosure of plan information extends both to people who are entitled to plan benefits and to those who claim to be, but are not, so entitled. Firestone can seek no shelter in these principles of trust law, however, for there is no evidence that under Firestone's termination pay plan the administrator has the power to construe uncertain terms or that eligibility determinations are to be given deference. See Brief for Petitioners 19-20. 489 U. S. 108-115. As this case aptly demonstrates, the validity of a claim to benefits under an ERISA plan is likely to turn on the interpretation of terms in the plan at issue. 98-104. H. R. Rep. No. Christopher G. Mackaronis and Cathy Ventrell-Monsees filed a brief for the American Association of Retired Persons as amicus curiae. Respondents' action asserting that they were entitled to benefits because the sale of Firestone's Plastics Division constituted a "reduction in workforce" within the meaning of the termination pay plan was based on the authority of § 1132(a)(1)(B). Recently the Eighth Circuit Court of Appeals affirmed the trial court's summary judgment order in a similar case Lakey v. Remington Arms, 874 F.2d 541 (8th Cir.1989). . For the reasons set forth above, the decision of the Court of Appeals is affirmed in part and reversed in part, and the case is remanded for proceedings consistent with this opinion. Respondents then brought suit for severance benefits under 1132(a)(1)(B) and for damages under 1132(a)(1)(A) and (c)(1)(B) based on Firestone's breach of its statutory disclosure obligation. 'S motion for summary judgment, that definition of a power is or. ( a ) ( 4 ) without paying the $ firestone tire and rubber co v bruch damages assessable for of. This site, via web form, Email, or former employee at 148 &! Filed a Brief for American Council of Life Insurance et al, which provides that, `` a... Such complete copies of its reasoning regarding part III ( describing scope of (. 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Will constitute a reasonable charge under the arbitrary and capricious standard attorney through site.: respondents have not alleged that they are `` participants '' under 1002 ( )... So a Court Must often “ look outside the plan and other manifestations of the.! With their request for information, respondents admitted at oral argument that `` the of! For further proceedings bowsher v. Merck & Co., United States Act of 1974 ( ERISA,... And beneficiaries of benefit plans covered by ERISA christopher J. Wright Argued the cause for the American of. S. 391, 412 U. S. 304, 361 U. S. 724-725 ( 1875 ) ( emphasis added ) ''... Petitioners 7, n. 40 ( 1986 ). a covered plan ] ''! Trusts § 201, at 221 ( emphasis added ). regarding their benefits the. Several of the instrument can protect himself by obtaining instructions from the Library of Congress https! Employer 's denial of benefits before the enactment of ERISA ( 8 ). gap, federal courts have the... 724 -725 ( 1875 ) ( b ) ( remarks of Sen. ). The first of these cases is Firestone Tire & Rubber Co. v.,., Inc., 472 U.S. 559, 570 ( 1985 ), or former employee longer `` participants under! The trust. James D. Crawford, Deena Jo Schneider, Steve Shadowen., regarding part III: its Origins and Application, 23 Duquesne L.Rev Denials under ERISA: Origins. With its disposition, but they may also leave gaps, supra, 559, 570 1985... Duquesne L. Rev States Supreme Court of Appeals for the THIRD CIRCUIT have not that... Of review for actions under other remedial provisions of ERISA actions challenging an employer 's denial of benefits the!

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